Investors May Want to Pass on This Snack Food Stock

Is JJSF worth its valuation?

Jan 13, 2022 at 10:11 AM
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The shares of J & J Snack Foods Corp (NASDAQ:JJSF) -- the maker of include Superpretzel, ICEE, Luigi’s Italian Ice, and more -- have barely budged from where they sat last year. In fact, the security headed into today with a 1.1% year-over-year deficit, and a 3.4% year-to-date loss. Though the stock saw a considerable rally off its Dec. 1 annual low of $135.04, a familiar ceiling near the $159 area, along with the 200-day moving average, rejected the rebound last week. 

jjsf jan 13

The company is  gearing up for its fiscal first-quarter earnings report, which is due out after the close on Monday, Jan. 31. Looking back at its past eight post-earnings moves, JJSF had seen mostly negative returns, falling lower after six of these reports. This includes a 10.7% drop after its January 2020 report. Regardless of direction, the stock has averaged a next-day swing of 4% during this time period. 

While analyst coverage is somewhat muted, another disappointing report could attract some bear notes, as two of the four brokerages covering the stock consider it a "buy" or better. Meanwhile, the 12-month consensus price target of $161.33 is a slim 2.4% premium to current levels.  

From a fundamental point of view, J & J Snack Foods stock has very little to offer from both a long- and short-term outlook. The equity trades at a price-earnings ratio of 50.07 and a price-sales ratio of 2.44, which both indicate a very high valuation. In addition, the company has struggled to grow its revenues and net income over the past few years. JJSF's revenues are currently down almost 4% since fiscal 2019 and its net income has decreased 46% since fiscal 2018.

The bottom line is that J & J Snack Foods stock is still expected to have a rich valuation at a forward price-earnings ratio of 32.68, despite the snack food company's anticipated growth.

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